Brazil state rules out Cemig sale to join debt relief plan, source says

Energy of Minas Gerais

31/01/2017 07:00

By Guillermo Parra-Bernal 
    SAO PAULO, Jan 31 (Reuters) - The Brazilian state of Minas 
Gerais has no plans to sell the controlling stake it has in 
power utility Cia Energética de Minas Gerais SA as condition to 
join a federal government-backed debt relief plan, a person with 
direct knowledge of the matter said. 
    According to the person, who requested anonymity because of 
the sensitivity of the issue, mineral-rich Minas Gerais wants 
part of the 92 billion reais ($29.44 billion) the federal 
government owes it in the form of export-promotion tax 
exemptions to be refunded if the state joins the debt program. 
    The sale of the state's 51 percent voting stake in Cemig, as 
the utility is known, looks unfeasible at this point, because 
the company is undergoing a drastic turnaround that is involving 
the sale of non-essential assets, the person added. 
    Epoca magazine reported on Monday, without saying how it 
obtained the information, that finance ministry officials back 
asking Minas Gerais to exit Cemig in exchange to access the debt 
relief plan. The program reduces debt payments and extends the 
maturity on about 427 billion reais of state debt. urn:newsml:reuters.com:*:nL1N1EN0CB 
    "The state will not accept the privatization of Cemig as a 
pre-condition to access the debt relief facility," said the 
person. Cemig is Brazil's No. 3 power utility. 
    Calls to the media office of Minas Gerais state were not 
answered after working hours. The finance ministry did not have 
an immediate comment. 
    Currently Minas Gerais owes 70 billion reais to the federal 
government, which has spurred a surge in debt-servicing expenses 
for the state amid tumbling tax revenues, the impact of Brazil's 
harshest recession ever and falling global mineral and metal 
prices between 2014 and early 2016. 
    With Minas Gerais under self-declared "financial calamity," 
Governor Fernando Pimentel has been at odds with other key 
shareholders over ways to cut the company's 16.3 billion-real 
debt. 
    Last month, his government brought about a reshuffle of 
Cemig's top brass in order to accelerate the disposal of several 
subsidiaries such as telecommunications and information 
technology firms. urn:newsml:reuters.com:*:nL1N1EF1SF 
    ($1 = 3.1255 reais) 
 
 (Additional reporting by Alonso Soto in Brasilia; editing by 
Diane Craft) 
 ((guillermo.parra@tr.com; Tel: +55-11-5644-7714; Mob: 
+55-119-8346-7153; Reuters Messaging: 
guillermo.parra.thomsonreuters.com@reuters.net)) 
 
Keywords: BRAZIL POLITICS/CEMIG